On April 1, 2014, the Department of Labor’s Office of Federal Contract Compliance Programs agreed to the dismissal of its December 2008 complaint against Florida Hospital of Orlando. This action follows DOL’s March 11, 2014, agreement to a five-year moratorium on compliance and enforcement actions against Tricare service providers. These developments reflect a significant rollback of OFCCP’s prior position as to its jurisdiction over Tricare service providers. In his March 11, 2014 letter to Congress, Secretary of Labor Thomas Perez recognizes Congress had intent to limit OFCCP’s jurisdictional authority over Tricare healthcare providers.

Background on OFCCP action against Florida Hospital

Tricare is the healthcare program for active duty and retired military personnel and their families. Florida Hospital participated in the network of healthcare providers available to Tricare beneficiaries under the prime contract held by Humana Military Health Services. Even though the Tricare contract provided that healthcare providers would not be considered subcontractors, OFCCP asserted jurisdiction over Florida Hospital. OFCCP took the position that Florida Hospital was a subcontractor and that the contrary language in the contract was void.

Many believed Congress resolved the OFCCP jurisdictional dispute in favor of Florida Hospital with the FY 2012 National Defense Authorization Act. Section 715 of the 2012 NDAA provides that Tricare network service providers and suppliers may not be considered subcontractors:

For the purpose of determining whether network providers under such provider network agreements are subcontractors for purposes of the Federal Acquisition Regulation or any other law, a Tricare managed care support contract that includes the requirement to establish, manage, or maintain a network of providers may not be considered to be a contract for the performance of health care services or supplies on the basis of such requirement.

Despite this new statutory language, OFCCP continued to assert compliance and enforcement authority over Tricare service providers. At the time of the 2012 NDAA’s consideration and enactment, OFCCP Director Patricia Shiu stated: “Section 715 of the NDAA seeks to exempt certain Tricare providers from complying with civil rights laws that—for nearly half a century—have prohibited employment discrimination and ensured affirmative action for vulnerable workers. Our commitment to enforcing those laws is unwavering. This isn’t over yet.” This is consistent with OFCCP’s historical efforts to broadly define the scope of its own jurisdiction. In briefs filed in the Florida Hospital litigation, OFCCP argued that Congress had not clearly removed its authority.

OFCCP pulls back after congressional oversight

With the dismissal of the Florida Hospital matter and the new five-year moratorium on OFCCP, DOL now appears to recognize Congress had always intended to limit its authority over Tricare service providers. Secretary Perez’s letter acknowledges the congressional intent underlying section 715: “You have made clear that, in your judgment, Congress intended to eliminate entirely OFCCP’s jurisdiction over TRICARE subcontractors . . . .”

DOL may be attempting to avoid further legislative action on this issue. House Resolution 3633, The Protecting Health Care Providers from Increased Administrative Burdens Act, seeks to make congressional intent in Section 715 of the 2012 NDAA unmistakably clear. H.R. 3633, which was intoduced Dec. 3, 2013, provides that any entity that “receives a payment from the Federal Government . . . related to the delivery of health care services to individuals . . . shall not be treated as a Federal contractor or subcontractor by the Office of Federal Contract Compliance Programs based on the work performed or actions taken by such individuals that resulted in the receipt of such payments.”

In lieu of legislative action and in connection with the five-year moratorium, DOL has proposed instead to pursue “a workable administrative solution” consisting primarily of “extensive outreach and technical assistance to inform TRICARE participants of their responsibilities . . . under Federal statutes applicable to contractors and subcontractors.”

DOL’s proposal may not satisfy Congress. Among other things, DOL has left open questions concerning whether contracts with Medicare Advantage Plans (Part C) and Medicare Prescription Drug Plans (Part D) are covered Federal contracts or subcontracts. Should H.R. 3633 move forward, these questions will be clearly answered. Under H.R. 3633, Medicare Part C and Part D providers will not be treated as contractors or subcontractors under federal law.

We anticipate further developments in this fast-moving area.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.